10/20/23 Hodgepodge: COVID State Government Bailouts, How Immigrants Challenge Reparations Argument, "Race to the Bottom" Myth

Another busy week for me, which is why I felt the need to go into hodgepodge mode for today to make sure I still published two pieces here this week. Today, I cover three topics. The first is whether the federal government needed to provide state and local governments with bailout money during the pandemic. The second continues to scrutinize reparations by asking who should pay for reparations in light of the fact that so many people's ancestors arrived after the Civil War, and what sort of challenges that creates for the pro-reparations side. The third is whether the "race to the bottom" is an actual phenomenon, especially in the context of its negative connotation.

We did not need the COVID-era bailout of state governments. In response to the pandemic, the U.S. federal government went on a spending binge in the name of "pandemic relief." The government tried to pass a bailout of state and local governments in 2020 (see my criticism of bailing out state and local governments here) with the intent of keeping state and local governments afloat during the pandemic. This bailout ended up becoming a $350 billion line item of the American Rescue Plan Act (ARPA) called the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). How did that turn out? The Government Accountability Office (GAO) released a report last week finding that states spent 45 percent of  CSLFRF funding (38 percent for local governments).  This GAO finding implies that the ARPA was unnecessary. Add that finding to the fact that ARPA is a major cause of our current bout of inflation.

The immigration challenge for reparations. The argument for reparations has become a hot-button issue in the United States. The premise of reparations is to recompense for harms and costs incurred as a result of slavery. I first criticized reparations in 2014 based on ethical, legal, and logistical issues. Earlier this year, I scrutinized reparations once more because San Francisco was considering paying $5 million to each eligible African-American. I asked a series of questions to challenge the validity of reparations, including "Who is going to pay for it?" 

Yesterday, a report released from the conservative Manhattan Institute tackles this question at some length. They look at historical immigration details to see how many people immigrated to the United States since the Civil War (see below). What fraction of nonblack Americans have ancestors who arrived after the Civil War? Per this report, the answer is as high as 70 percent, which includes over half of non-Hispanic white people. Reparations are about attempting to undo a past injustice. It is difficult to justify making people whose ancestors never contributed to the U.S. economy prior to 1865 to pay for reparations. This report serves as an illustration of how murky the argument for reparations is and how arduous it would be to implement without inflicting more injustice.

"Race to the Bottom" is a myth. The "race to the bottom" is an argument of how globalization is bad. Essentially, it argues that deregulation and lower taxes are used to attract businesses to other countries. The reason why this is deemed "bad" by those on the Left (Nobel economist Joseph Stiglitz comes to mind) is because it allegedly benefits corporations while screwing over everyone else. I came across this article from a director at the libertarian Cato Institute that was published this week illustrating why that it is a myth. The author cited a June 2023 research paper from the National Bureau of Economic Research showing how an increase in foreign direct investment (FDI) does not result in an erosion of labor rights (Im and McLaren, 2023). As I have argued multiple times on this blog, deregulation or lower taxes are not evil phenomena for the economy, whether global or domestic. Rather than harm, they are generally net goods in our world. To remind us of that reality, the Cato Institute released a report entitled "The (Updated) Case for Free Trade."